To Cut Corruption in the Palestinian Authority, Cut Off Development Aid

Foreign development aid plays a unique role in the lives of Palestinians, as aid is the main driver of growth in the Palestinian economy. For this reason, many people welcomed the Biden Administration’s announcement in April to reverse the Trump Administration’s decision to halt all development aid to Palestinians. Yet widespread corruption in the Palestinian Authority (PA)—which remains the principal recipient of aid to Palestinians—threatens to undermine the effectiveness of aid. Worse, foreign aid to the PA helps perpetuate and exacerbate the PA’s culture of corruption.

Corruption in the PA is deeply entrenched. To illustrate with just a handful of many possible examples: Between 2008 and 2012 alone, over US$2.3 billion in development aid money from the European Union to the PA was embezzled. In 2017, the PA spent staggering sums on fake companies and projects, including a non-existent airline. Rather than develop welfare programs to distribute social services or development aid money to the public, the PA allocates the money to salary payouts for security officers and government officials in job placements secured by cronyism. High-ranking PA officials regularly establish their own NGOs and phony companies to attract additional funds from aid programs. Yet for the most part donors have turned a blind eye to the PA’s blatant corruption and mismanagement of development funds. (For instance, even when investigators reported PA officials’ massive embezzlement of EU aid funds, the EU did not discontinue the provision of aid.) Consequently, despite more than US$15 billion in development aid given to Palestinians in the past thirty years, that aid has failed to reduce poverty or deliver sustainable improvements in ordinary Palestinians’ quality life.

And it’s not just that the PA’s corruption undermines the effectiveness of aid. Perhaps the even bigger problem is that the flow of development aid contributes to and props up the PA’s culture of large-scale corruption. The more funding the PA can access, the more powerful it becomes, and the more capable it is of embezzling funds and extorting bribes from its populace. Worse still, the costs of the corruption that the aid to the PA fuels are not merely economic costs: In Palestine, corruption contributes to needless violence, political radicalization, and, ultimately, the loss of innocent lives.

The only way to break out of this malignant cycle is for donors to call a halt to unfettered development aid to Palestinian government institutions, which have proven themselves time and again to be too weak and unscrupulous to handle aid without corruption.

Donors, including the US and EU, should set a timeline for the expiration of current aid packages and should make clear that no further aid will be forthcoming until the PA and other Palestinian governance organizations provide robust evidence of reduced corruption and assurances that the development aid money they already have is used for development projects and goals, with demonstrable positive results. 

In making this evaluation, donors should assess the PA’s transparency, accountability, and integrity. They can start by scrutinizing how the PA uses the aid that it has already received but not yet allocated. (At present, for example, the PA has just received the first in a series of payouts of nearly US$300 million promised by the Biden Administration. Much of this aid was given in response to displaced populations in Gaza and the West Bank.) Donors should demand, and the PA should be able to provide, information on the manner in which the aid was administered and the outcome of that administration to the intended beneficiaries. Concurrently, donors should ask whether the PA has strengthened and enforced its anticorruption legislation—which often exists on paper but not in practice. For example, donors should insist that the PA improve its whistleblower system, so as to ensure that whistleblowers who expose corruption in the PA have adequate assurances of confidentiality and adequate protections against retaliation.

If the PA can demonstrate, through its administration of the aid it has already been pledged and through genuine reforms to its anticorruption system, that it is capable of changing its corrupt culture, then perhaps donors can consider resuming development aid to the PA. If not, donors should stop throwing good money after bad. This is obviously a drastic response, given that foreign aid is the PA’s main source of funding. But if this draconian measure doesn’t create the urgency needed for the PA to establish genuine institutional safeguards to ensure that development aid money is used for investment, trade, or production, rather than for corrupt material gain, then it is unlikely that anything ever will. 

Some might worry that cutting off direct development assistance to the PA will cause its collapse, thus creating a vacuum that Hamas might seize. That is an understandable concern, but it neglects the bigger picture. Entrenched corruption in the PA is what enabled Hamas to attain power in the first place. Moreover, given that Hamas’s mis-governance in Gaza has undermined its claim to be a non-corrupt alternative to the PA, it is quite possible that, if the PA proves incapable of cleaning itself up, other alternatives might emerge. It is hard to predict what might emerge if the aid cutoff causes the PA to collapse, as there are currently no existing governance organizations or non-PA affiliated political parties that can easily replace the PA. But the recent appointment of Arab political parties in Israel’s governing parliamentary coalition does offer some hope that in the future, Israel might play a more positive role in enabling Palestinian governance. 

To be clear, cutting off aid to the PA does not mean abandoning the Palestinian people. For example, donor governments and agencies can and should consider depositing development aid directly in the hands of Palestinians and grassroots organizations. Directly funding local projects is more likely to improve the lives of Palestinians than empowering corrupt institutions ever will. But continuing the flow of no-strings-attached money to the PA will do little more than prop up and perpetuate the PA’s systemic corruption. And that corruption, if allowed to continue unabated, will not only thwart the efforts of ordinary Palestinians to improve their economic prospects, but it will encumber any hopes of peace and further prolong the Israeli-Palestinian conflict.

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